NETWORK POWER AND ELECTRICITY SYSTEMS

1. Introduction

Network power in electricity systems describes the economic, technical and institutional influence exercised by actors that control or govern essential electricity networks. Transmission and distribution infrastructure connects generators, suppliers, storage facilities and consumers. Because electricity networks have strong natural-monopoly characteristics, control over connection capacity, network access, congestion management and charging can create substantial structural power.

In Great Britain, network power is controlled principally through the Electricity Act 1989, the Competition Act 1998, the Energy Act 2023, licence conditions, industry codes and regulation by the Gas and Electricity Markets Authority (GEMA/Ofgem). Modern regulation seeks to ensure that network power supports reliability and investment without enabling discriminatory or anti-competitive conduct.

2. Sources of Network Power

Network power arises because market participants normally cannot operate effectively without access to transmission or distribution infrastructure. A generator may possess substantial generation capacity, but without a grid connection it cannot efficiently deliver electricity to consumers.

Network operators can therefore influence connection timing, available capacity, network charges, curtailment and infrastructure investment. This creates what may be described as infrastructural or gatekeeping power.

The Electricity Act 1989 addresses this structural position through licensing and statutory regulation. Transmission and distribution activities generally require licences, enabling Ofgem to impose enforceable obligations concerning network operation, charging and access.

3. Network Access and Competition

An important regulatory objective is non-discriminatory network access. Electricity networks should not favour affiliated businesses or particular generators without lawful justification.

Competition law provides an additional safeguard. The Competition Act 1998, particularly its prohibition concerning abuse of a dominant position, may become relevant where an undertaking possessing substantial market power engages in exclusionary or exploitative conduct.

Sector-specific regulation is nevertheless especially important because network monopoly power cannot simply be eliminated through ordinary market competition. Regulators therefore supervise tariffs, connection methodologies, investment and service standards.

4. Ofgem and Economic Regulation

Ofgem controls network power partly through price regulation. Under the RIIO framework, network companies receive regulated revenues linked to expenditure, outputs, incentives and performance.

This framework seeks to prevent monopoly operators from extracting excessive revenues while preserving incentives for investment in transmission lines, substations, digital systems and network resilience.

Network regulation is increasingly important because the transition to renewable electricity requires extensive infrastructure. Offshore wind, distributed solar, batteries and electric vehicles may require substantial expansion and reinforcement of existing networks.

5. NESO and System-Level Power

The Energy Act 2023 provided the statutory foundation for an independent system operator and planner. The resulting National Energy System Operator (NESO) began operating on 1 October 2024.

NESO introduces another dimension of network power because strategic system planning influences where infrastructure is developed and how future energy requirements are coordinated. Institutional separation between commercial network ownership and system-level planning is intended to promote independence, transparency and whole-system decision-making.

6. Case Law – R (British Gas Trading Ltd) v Gas and Electricity Markets Authority [2019] EWHC 3048 (Admin)

Case Name/Citation: R (British Gas Trading Ltd) v Gas and Electricity Markets Authority [2019] EWHC 3048 (Admin).

Facts: British Gas challenged regulatory action taken by GEMA within the statutory energy-regulation framework.

Legal Issue: The proceedings concerned the legality of decisions made by a specialist regulator exercising statutory powers affecting energy-market participants.

Judgment: The case demonstrates the courts' supervisory role over decisions taken within technically and economically complex regulated markets.

Legal Principle/Ratio Decidendi: Specialist regulatory expertise does not remove regulatory decisions from judicial review. GEMA must act within statutory powers, consider legally relevant matters and comply with ordinary public-law requirements.

Significance: The case illustrates an important limitation upon institutional network power: regulatory authority itself remains legally accountable.

7. Case Law – Albion Water Ltd v Water Services Regulation Authority [2008] CAT 31

Facts: Albion Water challenged arrangements concerning access to infrastructure controlled by an incumbent utility, raising significant questions about infrastructure access, dominance and pricing.

Legal Issue: Whether conduct relating to access and pricing constituted an abuse of dominant position under competition law.

Judgment: The Competition Appeal Tribunal found abusive conduct in relation to the relevant pricing arrangements.

Legal Principle/Ratio Decidendi: Control of essential network infrastructure cannot lawfully be used through discriminatory or unfair pricing to obstruct effective competition.

Significance: Although arising in the water sector, the principle is highly relevant by analogy to electricity networks because both involve monopoly infrastructure upon which competing market participants depend.

8. Conclusion

Network power is unavoidable in electricity systems because transmission and distribution infrastructure performs essential monopoly functions. UK law therefore seeks to transform uncontrolled infrastructural power into regulated network authority. Licensing, Ofgem price controls, competition law, NESO's strategic coordination, non-discriminatory access rules and judicial review collectively constrain the exercise of network power. As electricity becomes increasingly renewable, decentralised and digital, effective regulation of network power will remain essential for competition, affordability, energy security and net-zero transition.